Facebook Made Its Second Largest Acquisition Last Week And Its Much Bigger Deal Than You realise

Karma app, now part of FacebookA gift for Facebook.

On the day Facebook hit the public markets, it also announced the acquisition of Karma, a social gift giving application.Karma only has 16 employees, and most people assumed it was yet another acqui-hire for Facebook. Those people are wrong, it’s a much bigger deal, both literally and figuratively.

Doug MacMillan at BusinessWeek reports Facebook paid $80 million for the startup, which is its second biggest purchase ever after Instagram.

He also reports that Facebook is going to keep Karma open for business, and hopes it will generate a new stream of revenue for the company.

Karma imports data from Facebook on users like birthdays, likes, and interests. From there, it makes gift recommendations for users. The user then picks out a present and can send it to a friend.

These aren’t virtual gifts, either. These are real things, like bottles of champagne.

Facebook’s e-commerce efforts thus far has been flops. If Karma has unlocked a way to make social commerce work it could be a big deal for Facebook.

UPDATE: Here’s how the app looks and works >

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